Associate Partner at Elixirr
Luc Froehlich, Global Head of Digital Asset Solutions at Fidelity International, was an early adopter of crypto, investing in bitcoin back in 2015 – the early days, so to speak, for a sector that has moved with pace in such a short period of time.
Froehlich has a background as a credit analyst, trader and fund manager, working for industry heavyweights like Credit Suisse and Manulife Asset Management. Cryptocurrencies were still an incredibly new frontier at that time. In 2016 and 2017, shortly after Froehlich took a step into crypto investing, a wave of initial coin offerings (ICO) started coming out. Froehlich says, over the next couple of years, he underwent an “educational journey” – and senior leaders at Fidelity, whom he joined in 2016, started becoming more vocal about the potential for cryptocurrency.
He believes that a lot has matured in the space since those halcyon days, sparked by the increasing mainstreaming of cryptocurrencies like bitcoin. In the beginning, crypto was the preserve of geeks and tech nerds – but in the last couple of years, it’s started to attract the attention of those in the traditional finance space.
Fidelity’s strong culture of innovation
The part of Fidelity’s business headed up by Froehlich focuses on digital assets and only officially launched at the beginning of 2022, but it was the culmination of a long journey into decentralised assets. The fact that Fidelity’s customers were asking them to invest in this space was one of the primary motivating factors behind the launch of the new business unit.
“I think we have a philosophy of pushing the boundaries and using new technologies,” he tells us. “There is a very entrepreneurial spirit that runs within Fidelity International. Most employees have an opportunity to test certain assumptions and hypotheses, to potentially launch new lines of business and new lines of service.
“It doesn't have to come from the top; there are a lot of people within the company that are given the flexibility of testing a new concept. That's also one of the reasons that we managed to launch as a standalone department dedicated to digital assets.”
Need to ramp up education remains
Fidelity’s first digital assets product launch was not just a case of a new asset class, it was a case of a new technology that clients had to become accustomed to. Questions around custody pervaded at that time, as they do today, and there was uncertainty about the regulatory wrapper that would surround a launch of this nature.
“We came to the conclusion that, because the client demand was there, our role was not necessarily to dictate what to do but to offer to investors a convenient and secure way to access this asset class. So the way this product was positioned was as an access product. If you are interested, if you think that you are knowledgeable on the topic, we will provide you access. That also meant that the focus has been very much on institutional investors, and not on retail investors.”
Froehlich believes that improving the level of understanding and education, particularly among retail investors, is critical – something that will not have been helped by the collapse of FTX at the end of 2022. But for institutional clients, who have already taken the decision to invest in digital assets or started building an infrastructure around them, this is not such a core issue because the move towards digital assets is a natural evolution.
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